DELIVERING COMPETITIVE REVENUE, CONTROLLING COSTS, AND EXECUTING ON PLAN TO
                                                                          RETURN TO PROFITABILITY

CHICAGO, Oct. 21, 2008 – UAL Corporation (NASDAQ: UAUA), the holding company whose primary subsidiary is United Airlines, reported a third quarter net loss of $779 million or $252 million, if non-cash, net mark-to-market losses on fuel hedge contracts and certain accounting charges are excluded, despite an increase of $946 million in consolidated fuel expense.  For the third quarter ended Sept. 30, 2008, the company:

·          Reported basic and diluted loss per share of $1.99 excluding non-cash, net mark-to-market hedge losses and certain accounting charges outlined in note 5. United’s reported GAAP loss per share was $6.13.

·          Recorded $519 million in non-cash, net mark-to-market losses on its fuel hedge contracts, as a result of the drop in oil prices at the end of the quarter. The company recorded a cash gain of $17 million on contracts that settled during the quarter bringing its consolidated cash fuel expense to $2.5 billion, $946 million higher than the prior year.

·          Reported a 6.1 percent increase year-over-year in mainline passenger unit revenue (PRASM), excluding special items and Mileage Plus accounting impacts. Including these items, mainline PRASM increased 4.5 percent year-over-year.

·          Demonstrated good cost control while reducing capacity, with mainline cost per available seat mile (CASM), excluding fuel and certain accounting charges, flat versus the same period in 2007, despite 4.0 percent lower capacity. Mainline CASM including fuel and certain accounting charges for the quarter was up 30.8 percent versus the third quarter of 2007, reflecting a 96.4 percent increase in mainline fuel price per gallon including non-cash, net mark-to-market hedge losses.

·         Raised $1.4 billion in cash through various activities including aircraft financings, asset sales and amending its credit card agreements. 

“While today’s weak economic environment challenges our industry as demand softens, that same economic environment has caused oil prices to significantly decline from the unprecedented highs we witnessed earlier this year, suggesting significantly lower industry costs and improving operating margin,” said Glenn Tilton, United chairman, president and CEO. “We are taking the action required to return to profitability and continue to strengthen our liquidity while simultaneously improving the operating fundamentals to deliver the results our shareholders and customers expect.”

Quarterly Net Loss Driven By High Fuel Prices and Non-Cash, Net Mark-to-Market Losses  

The company recorded a $519 million non-cash, net mark-to-market losses on its fuel hedge contracts during the quarter as a result of the recent drop in the price of oil.   The non-cash loss reflects the change in book value of the hedges during the quarter. Should fuel prices stay at lower levels, over time the company will enjoy lower prices on its unhedged fuel purchases offsetting cash losses that might be incurred at contract settlement. On a cash basis, the hedges that settled during the quarter resulted in a gain of $17 million.  At the end of the quarter, the fair value of the outstanding fuel hedge contracts was negative $230 million.  

Excluding the non-cash, net mark-to-market hedge loss and certain accounting charges outlined in note 5, in the third quarter of 2008 the company generated an operating loss of $150 million, versus operating income of $592 million last year primarily as a result of the $946 million increase in consolidated cash fuel expense.   The significant increase in average cash fuel price caused the company to generate a net loss, excluding the non-cash, net mark-to-market hedge losses and certain accounting charges, of $252 million in the third quarter of 2008.   Including the non-cash, net mark-to-market hedge losses and certain accounting charges, the company reported an operating loss for the quarter of $491 million and a net loss of $779 million.

Because of its net operating loss carry-forwards, the company expects to pay minimal cash taxes for the foreseeable future and is not recording incremental tax benefits at this time.

Strengthened Cash Position

As previously announced, the company received approximately $1.4 billion through various transactions it closed during the quarter.   This includes approximately $1 billion from revising the Chase Bank U.S.A., N.A. and Paymentech L.L.C. contracts, $300 million in new aircraft financings, $50 million from the release of restricted cash, and $43 million in proceeds from asset sales. 

The agreements with Chase and Paymentech will improve United's liquidity by an additional $200 million over the next two years. 

During the fourth quarter, based on closed transactions and agreements in principle (subject to final documentation and other conditions), the company received approximately $65 million from aircraft financings and also expects to receive approximately $120 million through the sale of various assets.  This includes the sale of a number of B737s that are being retired as part of our capacity reduction plan. This week the company signed an agreement in principle on an additional aircraft financing worth approximately $150 million.

Higher fuel prices caused the company to have negative operating and free cash flow during the quarter. The company generated negative $387 million of operating cash flow and negative $490 million of free cash flow, defined as operating cash flow less capital expenditures.

The company ended the quarter with an unrestricted cash balance of $2.9 billion, restricted cash balance of $248 million and $378 million in cash deposits held by its fuel hedge counterparties.  

“We are ensuring that United is well positioned in this difficult market: we have minimal capital obligations and we have been able to raise $1.4 billion, including a $125 million financing that closed just a few weeks ago in a very tough credit market,” said Kathryn Mikells, United’s incoming CFO. "We continue the work to further enhance liquidity and our $3.0 billion in unencumbered assets provide us with critical financial and operational flexibility."

Accelerating Revenue Growth, Good Cost Control and Improving Operating Performance

“We are pursuing an aggressive agenda to improve the fundamental performance of United,” said John Tague, executive vice president and chief operating officer. “We are seeing results against that plan: we are delivering good cost control, even as we reduce capacity, and we continue to produce solid revenue growth by further honing our network, and putting more choice in the hands of customers with products they value and are willing to pay for.”

Mainline RASM, excluding special items and Mileage Plus accounting impacts, increased by 6.2 percent year-over-year from the third quarter of 2007 due to strong passenger and cargo yield performance which more than offset lower passenger load factors.  Including special items and Mileage Plus accounting impacts, mainline RASM increased by 4.8 percent year-over-year.

The company’s cargo business continued its strong performance with a 10.6 percent year-over-year increase in revenue. Higher fuel surcharges, foreign exchange gains and strong yield improvements contributed to the cargo revenue increase.

Total passenger revenues excluding special items increased by 1.4 percent in the third quarter compared to the prior year as a result of a 7.1 percent gain in consolidated yield, more than offsetting the 1.6 point decline in system load factor and 3.6 percent decline in consolidated capacity.  Mainline domestic PRASM for the quarter excluding special items and Mileage Plus accounting impacts was up by 6.9 percent, aided by a 6.2 percent reduction in capacity; including these items, mainline domestic PRASM increased by 5.6 percent.   In September mainline domestic PRASM, excluding special items and Mileage Plus accounting impacts was up 11 percent year over year driven by a 10.8 percent reduction in capacity; including these items mainline domestic PRASM increased by 7.0 percent.  International PRASM excluding special items and Mileage Plus accounting impacts grew 5.0 percent in the third quarter compared to the same period last year, on a 0.8 percent decrease in international capacity year-over-year; including these items, international PRASM increased 3.3 percent.

Regional affiliate PRASM, excluding special items and Mileage Plus accounting impacts, was up 2.4 percent compared to last year, with a 4.9 percent increase in yield and flat capacity; including these items regional affiliate PRASM increased by 0.9 percent. Load factor for regional affiliates decreased 1.9 points in the third quarter of 2008 compared to the third quarter of 2007, while stage length for regional affiliates was up 4.2 percent for the same period.

¹PRASM adjusted for Mileage Plus effects (See Footnote 5).

²PRASM excludes special items which adds approximately 0.9 percentage points to the growth rate

³ASM (available seat miles)

Good Cost Performance

Third quarter mainline CASM, excluding fuel and certain accounting charges, was flat versus last year at 7.71 cents, despite a 4.0 percent decrease in mainline capacity, demonstrating United’s continued focus on controlling non-fuel costs.  Mainline CASM, including fuel but excluding the non-cash, net mark-to-market losses and certain accounting charges, increased 21.6 percent to 13.78 cents.    Including the mark-to-market losses and certain accounting charges, mainline CASM increased by 30.8 percent year-over-year to 14.75 cents, reflecting the steep increase in fuel price on average during the quarter as well as the large non-cash, net mark-to-market accounting loss driven by the sharp decline in the price of oil experienced at the end of the quarter. 

The company has classified the majority of its various fuel hedging positions as economic hedges for accounting purposes.   Gains and losses on economic hedges are included in the fuel expense line while gains and losses from hedges that do not qualify as economic hedges are recorded in the non-operating expense line.   

Actions to Improve Operating Performance

The company continues its efforts to improve operational performance, improving execution, increasing average scheduled ground time and adding spare aircraft.  This, coupled with the reduction in ground delays resulting from the industry-wide cut in capacity, has begun to yield improvements in the company’s on-time performance. For the third quarter the company recorded its best on-time arrival performance since 2006. 

Business Highlights

• United and Westin Hotels & Resorts launched a new level of comfort with the Westin Heavenly® Bed products and signature amenities for first and business class customers who fly United’s p.s. service. 

• United and Aer Lingus announced the beginning of their codesharing agreement by enabling United customers to book connecting flights on Aer Lingus’ network for travel starting Nov. 1, 2008.    Beginning in April 2009, Aer Lingus will place its code on United Airlines domestic flights giving customers access to United’s entire North American network.

·        United filed an application, along with eight other Star Alliance members, with the U.S. Department of Transportation (DOT) for antitrust immunity with Continental.  In addition the company requested DOT approval to establish a trans-Atlantic joint venture, with Continental, Lufthansa and Air Canada.  Approval would allow the carriers to work closely together to deliver highly competitive flight schedules, fares and service.  

• United began its new premium service to Asia with its newly reconfigured Boeing 747.  Customers in United First and United Business on newly reconfigured aircraft may enjoy more than 150 hours of movies and television shows on-demand; relax with fully lie-flat seats; and dine on appetizers and entrees designed by world-renowned chef Charlie Trotter on outbound U.S. flights.

• United announced the availability of Award Accelerator ^SM, a new offering that allows customers to purchase redeemable Mileage Plus miles in addition to the miles they are already earning on a specific itinerary. Miles available for purchase in most cases are based on the actual flown mileage of each leg of the trip. 

• United announced policy changes to improve travel for active duty military personnel, including complimentary, space available access to United’s spacious Economy Plus® seating area and the ability to check up to three bags free of charge.

• United increased the service fee to check a second bag on a domestic flight from $25 to $50 one way.

Outlook

The company’s capacity outlook for the fourth quarter, full year 2008 and the full year 2009 is shown below.